JPMorgan downplays stablecoin threat as local bankers warn of $6.6 trillion risk

Core Viewpoint - Community bank leaders are urging U.S. senators to address loopholes in stablecoin legislation, warning that trillions of dollars could leave traditional bank deposits, negatively impacting local lending [1][2][4] Group 1: Concerns from Community Bankers - The American Bankers Association's Community Bankers Council expressed concerns that stablecoin issuers are finding ways to offer yield-like incentives, which could divert savings from banks that rely on deposits for loans [2][4] - The ABA estimates that up to $6.6 trillion in bank deposits could be at risk if stablecoin practices continue, potentially harming small businesses and local economies [3][4] - The letter highlights that while the GENIUS Act introduced oversight for stablecoins, it does not fully prevent issuers from indirectly compensating users, which undermines the intent of the legislation [4] Group 2: JPMorgan's Perspective - JPMorgan has a different view, downplaying the systemic risk posed by stablecoins drawing savings onto blockchains for higher yields [5][6] - A JPMorgan spokesperson noted that the presence of various forms of money, including stablecoins, will coexist and serve complementary roles in the financial ecosystem [6] Group 3: Ongoing Industry Debate - The letter from community bankers is part of a long-standing effort by U.S. banking groups to limit the issuance of dollar-backed stablecoins, which are increasingly popular in the crypto economy [6][7] - Previous attempts by bank trade groups have included calls to restrict stablecoin issuance to regulated banks or to ban interest-bearing tokens altogether [7]